Wednesday, December 15, 2010

New York State Senator and His Son Charged with Embezzling Funds from Not-for-Profit Bronx Health Care Centers

Earlier today, a federal grand jury in Brooklyn returned an indictment charging Pedro Espada, Jr., a New York State Senator for the 33rd Senatorial District in the Bronx, New York, and his son, Pedro Gautier Espada, with five counts of embezzlement from a nonprofit health care network receiving federal funding, and one count of conspiracy.* The defendants’ initial appearances are scheduled for tomorrow at 2:00 p.m. before United States Chief Magistrate Judge Steven M. Gold at the United States Courthouse, 225 Cadman Plaza East, Brooklyn, New York.

The charges were announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York; Andrew M. Cuomo, Attorney General for the State of New York; Janice K. Fedarcyk, Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office; and Charles R. Pine, Special Agent-in-Charge, Internal Revenue Service-Criminal Investigation, New York.

As detailed in the indictment, from 2005 through 2009, the defendants allegedly abused their positions at Soundview Healthcare Center (Soundview),** a network of health care clinics located in the Bronx, through a number of schemes designed to divert Soundview funds to their personal use and for the benefit of favored family members and friends. Pedro Espada founded Soundview in 1978 as a charitable not-for-profit organization under Section 501(c)(3) of the Internal Revenue Code. Soundview receives more than $1 million per year in federal grant money from the United States Department of Health and Human Services, as well as millions of dollars more in Medicare and Medicaid reimbursements.

The various schemes allegedly executed by the defendants to convert Soundview income and assets include the following:

Pedro Espada caused Soundview to pay charges for his personal expenses on the Soundview corporate American Express card; those charges included: more than $100,000 in personal meals for Pedro Espada and his family members, window treatments for Pedro Espada’s home, and tickets to Broadway shows and sporting events;
Pedro Espada and Pedro Gautier Espada used a for-profit janitorial company known as Community Expansion Development Corporation (CEDC) and controlled by them to divert funds from Soundview and then spent such funds for personal use and political expenses; those expenses included: the rent for Pedro Espada’s campaign headquarters, printing costs for campaign materials, heating and air conditioning work done on Pedro Espada’s home, pony rides and a petting zoo for a family member’s birthday party, and a $49,000 check Pedro Espada attempted to use as a downpayment on a Bentley automobile;
Pedro Espada and Pedro Gautier Espada diverted rental payments owed to Soundview to two different entities—CEDC and another for-profit janitorial company known as Soundview Management Enterprises (SME) and also controlled by them—and thereafter used such funds to pay personal expenses for themselves and family members; and
Pedro Gautier Espada rigged the awarding of a Soundview janitorial services contract by providing false contract requirements to other bidders, thereby ensuring that SME was awarded the contract at an inflated price, thus enriching himself and Pedro Espada.
The total amount allegedly embezzled by the defendants exceeded $500,000.

“The indictment alleges that funds that could and should have been applied to purchase medical equipment and enhance health care services for an historically under-served population were diverted by the defendants for their personal use and to benefit friends and family members,” stated United States Attorney Lynch. “In these difficult economic times, the charged crimes are all the more reprehensible.” Ms. Lynch added that the government’s investigation is continuing.

Attorney General Cuomo stated, “As alleged, Pedro Espada and his son spent years secretly siphoning money from a healthcare clinic in order to fund Espada’s lavish lifestyle. Taxpayer funds meant for the sick and poor were instead used for Broadway shows, fancy meals, and other opulent personal expenses of Senator Espada. Elected officials are supposed to serve the people not themselves, and this indictment should send a strong message: In New York, no one is above the law.”

FBI Assistant Director-in-Charge Fedarcyk stated, “In allegedly using Soundview as their personal piggy bank, Pedro Espada and his son violated the law. Embezzling public funds from a not-for-profit health care service provider was also a gross violation of the public trust. It amounts to a betrayal of Soundview clients, Espada’s constituents, and the greater public.”

IRS Special Agent-in-Charge Pine stated, “The law abiding public expects the government to take allegations of the theft of government funds very seriously, especially when they concern a public official. IRS-Criminal Investigation is proud to bring its financial investigative expertise to this investigation and we will continue to work with our federal and state law enforcement partners to bring this investigation to a complete conclusion.”

If convicted, the defendants face a maximum sentence of 10 years’ imprisonment on each of the embezzlement counts and five years’ imprisonment for conspiracy, as well as a fine of $250,000 on each count of conviction.

The government’s case is being prosecuted by Assistant United States Attorneys Colleen Kavanagh, Ilene Jaroslaw, and Todd Kaminsky, and Special Assistant United States Attorney Mitra Hormozi.

The Defendants:
Age: 57
Age: 37

* The charges contained in the indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.
** Soundview’s corporate name is Comprehensive Community Development Corporation.

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